Double blow for George Osborne as retail sales tumble and eurozone plunges back into recession

Worrying figures showed the 17-country eurozone economy shrank by 0.1% between July and September

The Chancellor was dealt a double blow today as the eurozone plunged back into recession and shop sales tumbled.

Worrying figures showed the 17-country eurozone economy shrank by 0.1% between July and September.

That follows a 0.2% decline in the second quarter.

The drop is important as the EU is the UK’s biggest export market.

Shadow Chancellor Ed Balls said: “This news that the eurozone has now followed the UK into a double dip recession is yet more evidence that countries collectively piling austerity upon austerity ultimately proves self-defeating.

“Jobs and growth are absolutely vital to get deficits and debts down, alongside steady and balanced spending cuts and tax rises.

Meanwhile the Office for National Statistics said UK retail sales crashed by 0.8% in October.

The fall was eight times worse than many expected and is the biggest decline since April.

Both sets of data are bad for George Osborne as he struggles to defend the Coalition’s handing of the economy, with pressure rising ahead of next month’s autumn statement.

British Retail Consortium director general Stephen Robertson said: “This is a really dispiriting result so close to Christmas.

“September’s slight upturn in sales offered retailers mild cause for cheer, but it was frustratingly short-lived.”

The result will also fuel concerns about the UK’s recovery after Bank of England governor Sir Mervyn King said that output may shrink again in the final three months of this year.

Samuel Tombs, UK economist at Capital Economics, said: “Looking ahead, the renewed pick-up in inflation and signs that the resilience of employment is starting to fade do not provide a positive backdrop for spending in the run-up to Christmas.”